View improves, but is it sustainable?

Tuesday's set ups: OVTI, FDRY, GDT, EWZ, GRMN, EQIX

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CHICAGO (CBS.MW) -- The major averages were flat off Tuesday's open following Monday's sizeable gains.

Recall that going into Monday's session, the Nasdaq appeared well situated for at least a corrective bounce. The index had carved out a six-session pullback of 114 points, or 5.7 percent.

At the same time, the Nasdaq had experienced support around 1,880 over four consecutive sessions. Specifically, over the four sessions spanning Tuesday through Friday, the index had touched intraday lows at 1,881, 1,880, 1,880 and 1,878.

As it turns out, the Nasdaq did indeed move higher Monday. Yet what actually transpired may have been more than a simple corrective bounce. The five-minute chart above illustrates the Nasdaq's prior two sessions, Friday and Monday.

After gapping higher Monday by 13 points off the open, the index extended its gain by another 40 points, closing at its intraday high of 1,947.

In the process, the Nasdaq took out two notable technical levels at 1,904 and 1,920. Those levels represent the Nasdaq's 50-day simple moving average (SMA) and 20-day exponential moving average (EMA) respectively.

This second chart is an hourly chart of the Nasdaq that widens the view to the prior 10 sessions.

Again, the most significant near-term development going into Monday was the four consecutive lows on the Tuesday through Friday sessions. Over that four-session span, the Nasdaq observed intraday lows at 1,881, 1,880, 1,880 and 1,878.

Also note that Monday the Nasdaq closely observed a technical level around 1,929. That level matches a congested area going back two weeks, as well as the top of the gap created last Monday.

This next chart on the Dow Industrials illustrates the exact levels addressed in The Technical Indicator last week.

Note that early Monday, the Dow edged out resistance around 9,720 and then observed that area as support. Also note that level matches almost exactly with the Dow's 20-day EMA at 9,721. (Because the chart above is an hourly chart it illustrates a 20-hour moving average).

So the near-term question ties to whether the Dow can sustain a posture above 9,720. If the index would violate 9,720 on a closing basis, you would begin to question the conviction underlying the current move.

The overall picture on the S&P 500 is similar to that on the Dow.

Again, early Monday the index took out a notable technical level at 1,044. That level also matches exactly with the S&P's 20-day EMA. So on the S&P, the near-term picture would begin to deteriorate on a break below 1,044.

Now the daily chart of the Nasdaq illustrates an interesting point. Each of the past three pullbacks to the 20-day EMA, points A, B and C, have concluded the same way -- with a notable gap higher and follow through into the close.

So for better or worse, the indices have yet to establish a true downtrend.

From a technical standpoint, the primary take away is that each of the indices reclaimed its 20-day moving average Monday. This means the near-term outlook has improved now pending their response to those respective levels. To review, those three levels now fall out as follows:

The Dow's 20-day EMA rests at 9,724.

The S&P 500's 20-day EMA rests at 1,045.

The Nasdaq's 20-day EMA rests at 1,925.

If there were one reservation regarding Monday's rally it would be the volume. The Nasdaq turned moderate total volume of about 1.7 billion shares Monday. Again, the index took out both its 50-day SMA and its 20-day EMA Monday, and you would conventionally look for more than just average volume.

Another issue for both the Dow and the Nasdaq is the longer-term picture, which will be addressed Wednesday.

From current levels, the Nasdaq faces initial resistance at 1,957, followed by significant overhead at 1,970. To the downside, look for notable support at 1,941 followed by an additional floor ranging from 1,926 to 1,929.

Tuesday's watch list

In the charts below, we identify several names that look interesting from a technical perspective. These are intended as radar screen names -- sectors or stocks that appear well positioned for a potential move higher over the near term. At the same time, we have identified the more immediate levels we believe are worth looking towards over the upcoming days.

Company

Symbol

Mon Close

Support

Resistance

OmniVision Tech

OVTI

$64.35

$60.50

New High

OmniVision Technology
OVTI, +0.00%
was the Nasdaq's second leading point gainer Monday, moving to a new all-time high.

OVTI was initially profiled here Nov. 12 and has since returned as much as 15.4 percent. From current levels, initial support at $60.50 approximates the upper end of its former range.

Company

Symbol

Mon Close

Support

Resistance

Foundry Networks

FDRY

$24.70

$23.70

$25.00

Foundry Networks
FDRY
has moved toward the upper end of its recent range.

From current levels, initial support at $23.70 currently represents its 20-day EMA. Resistance around $25.00 approximates the October high.

Company

Symbol

Mon Close

Support

Resistance

Guidant

GDT

$56.45

$53.50

$56.95

Originally profiled in The Technical Indicator on Monday, Nov. 17, shares of Guidant
GDT
have since moved to new highs.

From current levels, initial support at $53.50 represents the bottom of the gap triggered Wednesday. Resistance at $56.95 represents the 52-week high established Friday.

Company

Symbol

Mon Close

Support

Resistance

Brazil iShares

EWZ

$14.59

$14.05

$14.60

Brazil iShares
EWZ, -0.06%
edged to a new 52-week high Monday on 2.6 times daily average volume. The break comes from a two-month base, and the shares should stand a good chance of further follow through. Note the bullish near-term outlook would begin to break down on a violation of its 20-day EMA around $9.05.

Company

Symbol

Mon Close

Support

Resistance

Equinix

EQIX

$24.50

$23.65

New High

Equinix
EQIX, -0.17%
is another name that appears well positioned for additional upside.

The shares traded to a nineteen-month high Monday on nearly six times average daily volume. Initial support at $23.65 matches the former September high. Also note the initial move last week occurred on well above average volume.

Company

Symbol

Mon Close

Support

Resistance

Garmin

GRMN

$55.00

$54.10

New High

Garmin
GRMN, -3.24%
was profiled in The Technical Indicator last week, and remains well positioned based on the current picture. From current levels, initial support at $54.10 matches its former high established Friday and also approximates the October high at $54.08. The shares broke to an all-time high Monday suggesting near-term resistance should be limited.

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